New York Proposes Adult-Use Rules

The New York Cannabis Control Board (“CCB”) held a momentous meeting on November 21, 2022 wherein it continued to issue more conditional cultivation, processing, and dispensing licenses, but, perhaps more importantly, proposed for issuance the first set of adult-use cannabis regulations that will govern all of the non-conditional licenses issued to date.

New York, both through the CCB and the Office of Cannabis Management (“OCM”), has created a marketplace that is certainly not free of complexity. Indeed, CCB had initially issued hundreds of cultivation licenses without any regulatory guidance, only to issue written guidance (not formally promulgated regulations), halfway through the cultivation season that included strict rules regarding cross-ownership and lending opportunities for those with direct and indirect interests in licenses, i.e., what New York refers to as true parties of interest. The same can be said for the Conditional Adult-Use Retail Dispensary (“CAURD”) application process (with 36 CAURD applicants receiving approval at the 11/21/22 meeting), which, despite having regulations formally developed by OCM and adopted by the CCB, still oftentimes saw drastic changes to guidance issued by OCM related to material aspects of the application. For instance, after the application period for CAURD applicants closed, OCM issued renewed guidance identifying, among other things, that no prospective owner or TPI of a CAURD applicant can hold an interest in any cultivation/processing license anywhere in the world (including outside of New York state). In short, New York’s rules are complicated, winding, at times contradictory, and complex.

We provide the below referenced summary and preceding snippet of the New York Adult-Use Experience to identify the importance of not only reading the regulations, but understanding those rules in light of the ever shifting landscape of related OCM guidance that at times modifies, limits, and/or expands the information contained within the rules.

The biggest takeaways from the proposed rules are as follows:

1. Registered Organizations (“ROs”), i.e., the ten (10) medical vertically integrated operators, have either a delayed or impossible path to adult-use retail.

  1. The ROs route to adult-use conversion goes through two paths: (1) RO with no Dispensaries (“ROND”); or (2) ROs with dispensaries (“ROD”).
  2. RODs are prohibited from engaging in any adult-use sales until three (3) years after the first recreational sale occurs in New York (which has yet to occur).
  3. Another regulatory provision identifies that where the ownership of an RO holds a non-retail license anywhere, including outside of New York state, they are prohibited from even applying to operate as a ROD.

2. The application process, in contrast with the conditional adult-use cultivation and conditional adult-use processing rounds that constituted relatively lower bars to entry, will be competitive in one form or another.

  1. The rules identify that OCM may use application evaluation mechanisms including scoring, compliance, qualified lotteries, and a randomized selection process, or any combination thereof.
  2. The rules discuss scored narratives in the form of community impact and energy and environmental plans that contain robust regulatory criteria, i.e., a process designed to create separation between those that present creative and effective plans and those that do not.
  3. The rules discuss not only priority, but even instances of extra priority, afforded to groups whose ownership are either majority comprised and/or entirely comprised of groups meeting the social equity definitions identified under MRTA and/or the recently promulgated regulations.
  4. The rules require higher standards for site control, i.e., information on landlords, architectural drawings showing the interior or exterior of the premises, floor plans, statement of compliance with local codes, municipal notice, a copy of the certificate of occupancy, and lease/deeds/rental agreements/option contracts.

3. Site Selection and Municipal Approval are Critical.

  1. While MRTA identified that municipalities may opt-in/opt-out of retail and on-site consumption, the question remained what additional municipal oversight would apply to the licensing process.
  2. The proposed regulations preempt municipalities from imposing certain taxes and fees (or in other instances, fees out of whack with state liquor authority rules).
  3. The rules identify distance requirements between licenses, i.e., in a city, town, or village having a population of 20,000 or more, no less than 1,000 feet from another license of the same type; or, in a village of 20,000 or less, no less than 2,000 feet from the premises of a license of the same type.
  4. The rules identify mandatory distances from other sensitive uses, including:
    1. On the same road and within 500 feet between a retailer and school grounds.
    2. On the same road and within 200 feet between a retailer and house of worship.
    3. On the same road and within 500 feet from a retailer and a community facility.
  5. Municipalities may adopt reasonable time, place, and manner regulations, provided such rules do not make the operation of retailers or on-site consumption sites unreasonably impracticable.
  6. Applicants must notify municipalities of their intention to file an application with OCM, and municipalities may express an opinion either for or against that application.

Download the full alert here.

Law Clerk Nicholas Hanel co-authored this alert.

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